Tuesday, June 21, 2011

Gilt

The UK Gilt market is extremely robust, enough to handle another record Stg8.0 billion syndicated Gilt sale but the Debt Management Office (DMO) prefers to spread out its Gilt market operations, said Robert Stheeman, the chief executive at the DMO.Speaking at the Euromoney Global Borrowers and Investors Forum here, Stheeman said that the DMO has now completed around a quarter of its Stg167.5 billion gilt issuance plans for FY2011/12.Stheeman added the supplementary issuance programme, which includes syndicated sales is very useful to the pension fund industry."We try and match our supply a little bit more closely to the demand in the market, in particular for long-dated and also very long-dated Gilts, along with inflation linked Gilts, where we describe demand there at times as being 'lumpy'".Stheeman added a quarter part of the investment demand need is from the pension fund industry in the UK that needs to be able to sometimes transact in larger size, just through the auction process.

We also attempt to supplement the auction programme, i.e. syndications, that is uniquely useful to the pension fund industry."If you look at the statistics that we publish of the syndication sales, you see quite often more than 90% goes to pension funds," he said.The debt chief also talked about the importance and the growing size of Gilt Edged Market Makers (GEMMS) and said they were there to provide liquidity and the DMO expects GEMMS to participate at the auctions.Stheeman downplayed the notion of failed auctions, instead preferring to calling them uncovered auctions, and said the DMO isn't as concerned as that emphasis placed by the media on this.However, Stheeman added that if there is a series of uncovered auctions, then this may be a problem.The UK debt chief also said that the UK Gilts market is benefiting from the current turmoil in the eurozone add the DMO is aware of what is going on there.